Contracting or permanent, after redundancy

The fork in the road

Six weeks after my second redundancy, I had two offers in front of me. One was a permanent senior role at a consultancy, base around 180k plus super and bonus, four weeks leave, the usual. The other was a six-month day-rate contract with an end-customer, around 1,500 a day, no leave, no super contribution, finish in October.

On a spreadsheet they looked similar. In reality they were completely different bets on completely different versions of the next two years of my life.

I took the contract. I'd take it again. But not for the reasons most people assume.

The maths people get wrong

The first thing every contractor does is multiply day rate by 220 working days and feel rich. 1,500 by 220 is 330k. That's nearly double the perm offer. Easy decision, right?

No. Here's what comes off the top:

• Super (around 12% if you're not paying yourself, otherwise build it in)
• Annual leave (4 weeks unpaid, so 20 days at 1,500 = 30k off)
• Sick leave (10 days unpaid, 15k off)
• Public holidays (10ish days, 15k off)
• Insurance (income protection, PI, sometimes PL, call it 4-6k a year)
• Accountant fees (1-3k for a Pty Ltd setup)
• Gap risk (most contracts don't roll seamlessly into the next, build in a 10-20% downtime buffer)

After all that, a 1,500/day contract is roughly equivalent to a 200-220k perm package once you normalise. Better, but not double-better.

The actual financial advantage of contracting is more like 15-25% above equivalent perm, not 80%. Anyone telling you otherwise is selling you a course.

The non-financial differences

This is where it actually gets interesting. The money difference is real but small. The lifestyle difference is huge.

Contract:

• No performance review cycle (you're judged daily by whether the work ships)
• No internal politics (you're not in line for the next role)
• Clean exit (the SOW ends and you're done)
• Faster decisions on your time (no 14-step LD plan to take three days off)
• Skill compounding (different problem each engagement)
• More white space between gigs (if you can stomach the unpaid time)

Perm:

• Predictable income (the mortgage broker loves you)
• Leave you actually take
• Sick days when you're sick
• Career path if you want one
• Org gravity (mentors, sponsors, peer relationships that compound)
• Identity stability (you can answer "what do you do" with a single noun)

Neither is better. They are different bets.

When perm is the right call

After a redundancy, perm is usually the better choice if:

• Your runway is short (less than three months of expenses saved)
• You've got partner/kids who need predictable income for school fees, mortgage, insurance
• You're underqualified for day-rate work in your specialty (rates only stick if you're senior enough)
• You haven't run your own admin before (BAS, super, insurance, invoicing (it's not hard but it's not nothing))
• You want to stop thinking about work outside hours
• You need a visa, which usually requires permanent employment

That last one trips people up. If you're on a 482 or 186 visa, contracting via your own Pty Ltd usually doesn't satisfy sponsorship requirements. Check before you walk away from a perm offer.

When contracting is the right call

Contracting tends to suit you if:

• You have six-plus months runway
• Your skills are genuinely senior and the day-rate market exists for them
• You've got a strong network that produces inbound work
• You can stomach 30-60 days a year of unbilled time (sick, leave, gap between contracts)
• You're past the point where "head of X" titles matter to you
• You want time back more than you want salary up
• You're a contractor at heart (some people are; the others should stop pretending)

The last point is the unspoken one. Some men love the rhythm of arrive, ship, leave. Some men hate it. You can usually tell after one engagement.

The hybrid: fixed-term

There's a middle option: a fixed-term contract through a labour-hire agency. Often 6-12 months, paid as PAYG, super included, sometimes leave accrued. It's effectively perm with an end date.

Pros: easier to get than day-rate work, less admin, often a foot in the door for an end-customer perm conversion. Cons: lower hourly rate than true contracting, you're still in the agency's HR system, less flexibility.

For someone six weeks out of redundancy who needs income but isn't sure about full contracting, fixed-term is often the best transition.

The Pty Ltd question

True day-rate contracting in Australia almost always means setting up a Pty Ltd. Sole trader works for some specialties but most agencies and end-customers won't engage you that way (PSI rules, contractor-vs-employee tests, ATO scrutiny).

Pty Ltd setup costs maybe 1k-2k through an accountant, takes a couple of weeks, gives you the structure you need. Then you'll have BAS quarterly, year-end accounts, a separate bank account, and the discipline of pretending the company's money isn't your money.

Don't optimise for tax cleverness in the first year. Optimise for clean books. The clever stuff comes later when you've got a track record and an accountant who understands your patch.

The decision framework

Three questions, in order:

• How much runway have I got?
• How much do I need predictability vs flexibility?
• Is my market actually paying day rates I'd accept?

If runway is short and predictability matters, take the perm role. If runway is long and you've got a contract market that wants you, contract. If you're in the middle, take a fixed-term.

There's no permanent answer. I've gone perm, then contract, then perm, then contract again. Each move was right for that moment. The category isn't a personality trait, it's a tool.

Pick the right tool. Use it well. Switch when it stops fitting.